UTMA account question - Age of majority

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Latest post 02-13-2012 9:16 AM by Drew. 18 replies.
  • 02-09-2012 2:14 AM

    UTMA account question - Age of majority

    How is age of majority calculated in the following scenario:

     

    Account originally opened in Virginia (for best rate at time of opening) - AGE OF MAJORITY IS 18

     

    Account transfered to New Hampshire upon maturity of a CD and remains currently (for best rate) - AGE OF MAJORITY IS 21

     

    Minor resides in Nevada - AGE OF MAJORITY IS 18

     

    When does the minor get access to the funds, based on where the account is at or where the minor resides? Age 18 or 21?

  • 02-09-2012 11:39 AM In reply to

    • Drew
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    Re: UTMA account question - Age of majority

    Best guess, not necessarily any of above.

    Age of majority is not majority in general sense but as defined  in correct state UTMA. Most probably 21 (could be higher if so elected up front by donor)

    Correct state is where donor decided to set it up.  I  in PA could set up a UTMA for my grandchild in OR  under PA law , I move to FL and by time grandchild is 21 he is in NM  and the account is in a NY bank--but its still a PA UTMA

    In general the custodian must affirmatively turn it over at correct age  (and perhaps earlier if custodian so decides to do it)  Gone are the days as might have existed under older UGMA laws where kids proves identity and age and cleans out account merely by showing up at bank or brokerage at 18  and goes to a big party.



  • 02-10-2012 1:22 AM In reply to

    Re: UTMA account question - Age of majority

    I am not following how your PA UTMA followed into NY.

     

    When I moved the funds (upon maturity of CD) out of VA (VA UTMA) I opened an account in New Hampshire, and the account now reads NH UTMA.  I think I read somewhere about initial set up and/or transfer, and wherever the account resides is what applies up until age of majority is reached.  In other words, I think it goes by the state where the account resides as far as how the account is handled.  I just was unsure to as if the minor could receive the funds based on the age of majority as defined for UTMA accounts in that state minor resides.  More a question of does the state where the minor reside override the state of where the UTMA account exists (assuming the age requirements are different, as is the case in my case).

  • 02-10-2012 4:03 AM In reply to

    Re: UTMA account question - Age of majority

    basspower:
    In other words, I think it goes by the state where the account resides as far as how the account is handled.

    No, under the Uniform Transfers to Minors Act, the law where the account is first established governs that account even if the account is transferred to another state. Both VA and NH law state the same thing in their UTMA statutes: "The custodianship so created remains subject to this chapter despite a subsequent change in residence of a transferor, the minor, or the custodian, or the removal of custodial property from this state." So VA Statute § 31-38, NH Statute § 463-A:2 (bolding added). VA's UTMA statute defines a minor as someone under ag 18. Thus, since the account was first established in VA, the UTMA account here will terminate when the kid reaches 18, notwithstanding that had it been first established in NH the age would have been 21. It is not relevant in what state the minor now lives; his change of state of residence won't impact the age at which he's entitled to his funds.

    basspower:
    I am not following how your PA UTMA followed into NY.

    These rules are why Drew said that the UTMA in his example that was first established in Pennsylvania would continue to be governed by the PA UTMA law even though it was later transferred to NY.

  • 02-10-2012 7:35 AM In reply to

    • Drew
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    Re: UTMA account question - Age of majority

    What is it you are trying to do?  And are you custodian ? Early delivery or late delivery ?

    1. The account established in VA as a VA UTMA should have remained titled a VA UTMA even if the next CD or whatever was now lodged in NH

    2 Its extremely likely that whatever UTMA you read there is language to effect custodian may deliver it early



  • 02-10-2012 9:59 AM In reply to

    Re: UTMA account question - Age of majority

    Minor is currently 17, so trying to figure out if the funds have to be given in a year from now or in 4 years from now.

     

    I should also indicate that VA UTMA only appeared on the account titling.  There were no special forms or anything of the like signed setting up the account.  Literally, a bank account was opened.  Then it was closed upon maturity.  The funds were then used to open a new account.  NH bank says, if you're opening a new account in minor's name, it is NH UTMA - period.  So now I'm more confused with the suggestion that is should have remained a VA UTMA, I'm not even sure how it would be possible to transfer such an account to NH (since there are no forms or vehicle that would make way for that in NH either).

  • 02-10-2012 10:28 AM In reply to

    • Drew
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    Re: UTMA account question - Age of majority

    One could split views of right , wrong, or maybe and theories of a new gift vs a transfer --but oversimplified:

    1. The UTMA most likley says the person must ask for the funds --the custodian has no duty to rush to deliver them.

        The custodian has no duty to rush to educate the person as to possible alternative views or options.

    2. If you merely shut up and leave NH designation alone there is no penality to do so.

        2.1 If a question arises before you cross any  bridge  you address it when you get to said bridge.

    3. If college need based age is a big consideration --then you may want to think thru legitimate ways to get these funds

        off the  aid equation. They really do hurt big time!

        If the child needs the funds "early," you as custodian have no problem to do that.

        If the child is likley to go blow the funds you need to be very good about shuting up or supplying just the facts as   

        they apply to NH.  I can think of ways to inhibt quick transfer and get assets off the aid equation but it requires a set

        of  steps that may or may not pass the smell test and quirks of local state law that has an imperfect mesh with 

        Federal law and the Federal rules keep changing so unless that is a need--lets not invite problems.....

     



  • 02-10-2012 10:39 AM In reply to

    • Drew
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    Re: UTMA account question - Age of majority

    The more common post is about  custodians who refuse to turn it over  and/or may have pocketed it.

    The VA and NH codes read almost alike but for 21 vs 18.

    § 31-56. Termination of custodianship.

    The custodian shall transfer the custodial property to the minor or to the minor's estate in an appropriate manner upon the earlier of:

    1. The minor's attainment of eighteen years of age or if the transfer was made as provided in subsection D of § 31-45, the minor's attainment of twenty-one years of age; or

    2. The minor's death.



  • 02-10-2012 11:03 AM In reply to

    Re: UTMA account question - Age of majority

    basspower:
    I should also indicate that VA UTMA only appeared on the account titling.

    While the titling is not necessarily the determining factor, it does show an intent that the account be an UTMA account. One would have to look at what you did exactly in opening it up. But assuming it was an UTMA, then the law is pretty clear that VA law will apply even though you moved the funds to an UTMA account in NH. Note that if you failed to qualify it as an UTMA, it may instead have been an immediate gift to the minor, which may then mean he's entitled to the money right now.

    basspower:
    I'm not even sure how it would be possible to transfer such an account to NH (since there are no forms or vehicle that would make way for that in NH either).

    Simply putting the funds that had been in the VA UTMA account  into an UTMA in NH does that, the statute doesn't require some specific mechanism for the transfer.

    I disagree with Drew that the custodian can wait until the kid asks for the money after he reaches 18. UTMA statutes state that the custodian shall deliver the funds to the kid when he reaches the age specified in the statute, and that should be age 18 given that the UTMA was established in VA. Thus, if you are unclear on what you need to do, then see a NH attorney and bring copies of the relevant records and the citations to the VA and NH statutes I provided for advice on when you must deliver the funds to the kid.

  • 02-10-2012 3:22 PM In reply to

    Re: UTMA account question - Age of majority

    Taxagent,

     

    Since the minor, is still a minor I think that he would NOT be entitled to the money "right now" in any event right? Was that a typo?

     

    What a nightmare a UTMA account is.

     

    Thanks!

  • 02-10-2012 3:25 PM In reply to

    Re: UTMA account question - Age of majority

    I also think that Drew is on point with the exception of waiting for the beneficiary to ask for $$.  What if the beneficiary didn't even know the account existed (as is the case here).

    I won't even get into the spend down issue for college aid but money will be spend prior to beneficiary reaching age 18 for the reason of college aid consideration.

    I'm reasearching ways it can be spent down.  In this case, the custodian is NOT a parent and has no parental obligation so can spend funds "for the benefit of the minor" as custodian deems fit so long as it benefits the minor.  IE i read this to be a lot of things but not obvious stupid things like " I went to the Casino and put it all on black for the kid".

  • 02-10-2012 3:33 PM In reply to

    Re: UTMA account question - Age of majority

    basspower:
    Since the minor, is still a minor I think that he would NOT be entitled to the money "right now" in any event right? Was that a typo?

    No, it was not a typo. If the account was not an UTMA, then it may have simply been a bank account directly in the kids name, giving him immediate access to the funds. And yes, it is possible for minors to own bank accounts. That's the whole purpose of UTMA—it's a simple way to make a gift to a minor that he cannot access until later without creating a formal trust. It is a trust substitute.

    basspower:
    What a nightmare a UTMA account is.

    They are not a nightmare if you understand the rules before you set it up and take care to set it up properly. The UTMA rules are fairly clearly written and not all that difficult to use. I can see you don't like the idea that the kid might get his hands on the money at age 18, but that may be what is required here.

  • 02-10-2012 3:50 PM In reply to

    Re: UTMA account question - Age of majority

    basspower:
    I also think that Drew is on point with the exception of waiting for the beneficiary to ask for $.  What if the beneficiary didn't even know the account existed (as is the case here).

    Virginia Code § 31-56 states:

    "§ 31-56. Termination of custodianship.

    The custodian shall transfer the custodial property to the minor or to the minor's estate in an appropriate manner upon the earlier of:

    1. The minor's attainment of eighteen years of age or if the transfer was made as provided in subsection D of § 31-45, the minor's attainment of twenty-one years of age; or

    2. The minor's death."

    Now what about that suggests that the custodian may wait until the beneficiary asks for the money? It's clearly written in mandatory terms: "The custodian shall transfer...." and states that it occcurs at the EARLIER of the following two events: (1) the beneficiary reaching age 18 or, if the UTMA account specified age 21 in the account set up then at age 21 or (2) the minor's death. Nothing in it says anything about the minor having to request the funds to get them.

    Thus, under a VA UTMA, unless the UTMA account specified 21 as the age for the account to terminate, the latest the UTMA terminates and the funds delivered to the kid is when he turns 18. Part of the reason for this is exactly what you stated: what if the kid doesn't know about the account? If the custodian could hold it until the kid asked for it, the funds could concievably be held forever, and that is not the intent of the UTMA statutes.

    basspower:
    I'm reasearching ways it can be spent down.  In this case, the custodian is NOT a parent and has no parental obligation so can spend funds "for the benefit of the minor" as custodian deems fit so long as it benefits the minor.  IE i read this to be a lot of things but not obvious stupid things like " I went to the Casino and put it all on black for the kid".

    I suggest you get advice from a lawyer who has review all the facts you have before you start going down that road. I've seen two cases myself of custodians who took too liberal a view of what the money could be spent for and ended up having to pay the kid back later when the kid sued the custodian for breach of fiduciary duty becaue of improper use of the funds in the account.

  • 02-10-2012 4:58 PM In reply to

    Re: UTMA account question - Age of majority

    Yep - thanks Taxagent.  Good stuff.

     

    A large sum of the funds are going to go towards buying the beneficiary (minor) a car which is why the account was set up in the first place.

     

    I get what you mean now about the minor potentially having immediate access now (just a plain bank account) vs. a UTMA account.  That is of good question because literally the bank account was opened over the phone (no documents ever or any kind signed).  The account was set up under the kid's social security#.  The custodian was mailed account disclosures (standard disclosures).  Account reads John Doe, Custodian for John Smith VA UTMA. That is how the checks have always read, that is how the 1099's and statements have read.  So I now question also does a UTMA even exist since no UTMA form or agreement was ever completed. OR does just the act of opening the account as a UTMA esblish the UTMA.

  • 02-10-2012 10:11 PM In reply to

    • Drew
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    Re: UTMA account question - Age of majority

    It certainly looks like a UTMA--so why assume otherwise?

    Personally I think to buy a kid a car is a low priority item--but once child gets the money its his call.

    As custodian you are entitled to a modest fee for all your work--and perhaps any costs.

    With a bit of common sense you can probably spend the funds upon any realistic need the child has--your call--before the transfer date.

    I am sure taxagent is correct as you have a duty to turn it over ( or properly spend it upon child first)---just I've never seen any posts where a custodian who was slow about it was subject to any penalities.

     

    How large a UTMA are you talking about?



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